Configuring SAP ERP Sales and Distribution

Chapter 2: Enterprise Structure

Enterprise structure in SAP’s SD application represents the organizational structure within the business entity that is selling and distributing goods and services. To help you map this organizational structure into the SAP ERP software, SAP offers a set of building blocks. In this chapter, we will discuss these building blocks and show how to arrange them to set up the SD enterprise structure.

Overview

The SD enterprise structure in SAP ERP represents the structure of the sales and distribution entity of an organization. To map this structure into the SAP ERP software, you use various building blocks provided by SAP. You use a sales organization to replicate the selling entity into the SAP system; distribution channels to represent various channels being used by the enterprise to distribute goods to market; divisions to represent various product divisions that exist in the organization; sales areas to define the relationship among selling entity, channels of distribution, and product divisions; sales offices, sales groups, and sales districts to represent the geographical locations; and sales employee masters (from SAP HR application) to denote sales employees and their positions in the hierarchical sales reporting structure. The organizational element for setting up a plant and the plant assignments to other organizational elements such as storage location, shipping/receiving point, and loading point, helps you set up the distribution structure. This structure defines where and how the goods will be stored and how they will be shipped to the customers. Both the sales organization and the plant are assigned to the company code so that the accounting entries resulting from the sale of goods and services, as well as those resulting from the material movements in the plant, are posted to accounting. Finally, the plant is assigned to the combination of the sales organization and the distribution channel, allowing the sales organization to use the assigned plant structure when distributing goods and services to the customers and completing the typical enterprise structure setup in SAP SD application.

Enterprise structure in SAP SD does not exist in isolation. It has dependencies with enterprise structures from other modules too. Dependencies with financial accounting and materials management enterprise structure is of vital importance because it impacts the use of materials in the SD application as well as the accounting posting of the sales transactions. Therefore, before you set up your SD structure, you should work with an SAP FICO consultant to make sure that the company code, chart of accounts, fiscal year, and other enterprise structure customizations related to the financial accounting application of SAP ERP are already set up. A company code represents your organization’s legal entity, a chart of accounts represents the ledger accounts that you will use to post the sales transaction into accounting, and a fiscal year represents the financial reporting year for your company code. The bare minimum setup you need before you can start setting up the SD enterprise structure is the company code and fiscal year.

Setting up an enterprise structure is the foundation of your SAP implementation. It is therefore essential that you carefully analyze the structure of your client’s organization before you map it into the SAP ERP software. You need to understand how your selling entity is structured and how it operates by considering whether it is centralized or decentralized; what products the sales entity deals in; how the sales are made (directly or via partners); what the various methods of distribution of goods to the customers are; how many plants/distribution centers there are and what geographical locations they belong to; the structure of the sales team; the geographical locations (how many regions, territories, sales offices, and branch offices there are); and what kind of internal reports, MIS reports, and external reports (if any) are generated. It is a good practice to analyze the enterprise’s business requirements and draw a blueprint of the enterprise structure on paper before applying it to the SAP system.

TIP A good structural design will accommodate the company’s current needs and at the same time be flexible enough for the future. A good structural design will always yield better results in terms of operational control, reporting analysis, and smooth processing of the business transactions in the SAP ERP software.

Setting Up the Enterprise Structure

Setting up an enterprise structure entails two types of activity. You start with the definition activity and complete the setup with the assignment activity. Figure 2-1 represents the implementation guide (IMG) for SAP customizing, showing the definition and assignment activities menu path for setting up the enterprise structure in SAP ERP. Each of these activities is further divided into various application areas such as materials management (MM), logistics execution (LE), and financial accounting (FICO), to name a few. To set up an SD enterprise structure, we need to first define the SD structural elements in the definition activity for SD. We then need to assign these elements to each other to form an enterprise structure using the assignment activity. Let’s start with the creation of a sales organization.

Figure 2-1: IMG menu path to maintain enterprise structure

Setting Up the Sales Organization

The first step in setting up a sales structure in SAP is to set up a sales organization. A sales organization in SAP represents the selling entity of your client’s organization. It is the highest level in the SD enterprise structure and the one to which all the other building blocks are assigned. A sales organization has its own master data. All sales-related transactions are executed within the framework of a sales organization. When you create a customer master or a material master, you must provide the sales organization for which you are creating this master data. You must even enter a sales organization while creating the sales order document in SAP. (Refer to Figure 1-3 from Chapter 1, “Introduction to Sales and Distribution,” which shows sales organization 9090 on the order entry screen.) During processing of the sales cycle, the sales organization information gets copied over from order to delivery to billing and also helps you determine the company code while posting the sales transaction to accounting.

It is always advisable to keep the number of sales organizations to a minimum. You should only create multiple sales organizations when two or more selling entities operate on a totally different basis or when there is a legal requirement to have multiple sales organizations. For example, an organization running sales operations from multiple countries may end up having one sales organization for each country where it operates. Each of these sales organizations will then be assigned to the company codes that were set up for those countries.

Defining a Sales Organization

To create your own sales organization, use transaction code OVX5 or follow menu path IMG ⇒ Enterprise Structure ⇒ Definition ⇒ Sales And Distribution. Click the Execute button next to Define, Copy, Delete, Check Sales Organization. Following the Menu Path, you will be presented with the Choose Activity screen, as shown in Figure 2-2, providing you with the following two methods to define your own sales organization.

Figure 2-2: Choose Activity screen for defining a sales organization

Define Sales Organization Make this selection when you want to set up a new sales organization without copying it from any existing ones. You will have to manually enter all the required information to define your own sales organization.

Copy, Delete, Check Sales Organization Select this when you want to set up your sales organization by copying it from an existing sales organization. With this copy option, you can copy the complete sales organization structure from the source sales organization to the target sales organization. This is really useful in scenarios where the source sales organization structure closely resembles the target sales organization structure. You can also use this option to check and delete an existing sales organization structure. We will cover this method in detail when we set up our Mexican sales organization (9091) for Galaxy Musical Instruments.

We’ll define our first sales organization, “Galaxy Musical Instruments US (9090),” using Define Sales Organization option.

Select Define Sales Organization, and click the Choose button at the bottom of the screen in Figure 2-2. You now should see the sales organization configuration screen, as shown in Figure 2-3.

Figure 2-3: Overview screen for defining a sales organization

Here again, you are provided with the option to either create your own sales organization by using the New Entries button or by using the Copy button . Using the New Entries button provides you with a blank form where you fill in all the relevant details such as the name, address, and so on, for your sales organization. Using the Copy button will open a prefilled form with the name, address, and other information copied from the source sales organization. Depending...